Valuation and Market Analysis

return on investment

A measure of profits in relation to capital invested.

home inspection

A non-invasive examination of the mechanical, electrical and plumbing systems of a dwelling, as well as the components of the structure, such as the roof, ceiling, walls, floors and foundations.

gross rent multiplier

A number which, times the gross income of a property, produces an estimate of value of the property. Example The gross income from an unfurnished apartment building is $200,000 per annum. If an appraiser uses a gross multiplier of 7%, then it is said that based on the gross multiplier the value of the building is $1,400,000.

loan-to-value ratio

A ratio stating the outstanding mortgage balance as a percentage of the mortgaged property's fair market value.

comparison approach

A real estate comparison method which compares a given property with similar or comparable surrounding properties; also called market comparison.

regression, principle of

A real estate valuation theory which holds the worth of a greater valued property is negatively affected by the close proximity of numerous lesser valued comparable properties.

broker price opinion

An agent's opinion of a property's fair market value based on comparable sales.

capitalization approach

An appraisal method used by an appraiser to arrive at a property's value based on the present worth of a property's future net operating income.

market comparison

An appraisal method used by an appraiser to arrive at a property's value by a comparison of recent sales prices of similar properties, adjusted for differences in the properties.

home energy audit

An audit conducted by a Home Energy Rater evaluating the energy efficiency of the home.

appraisal

An individual's opinion of a property's value on a specific date, documented in an appraisal report.

capital gain

At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax computations. Gains are called short or long term based upon length of holding period after acquisition. Usually taxed at lower rates than ordinary income.

comparable sales

Sales which have similar characteristics as the subject property and are used for analysis in the appraisal process. Commonly called comparables, they are recent selling prices of properties similarly situated in a similar market.

opportunity cost

The cost of an action that is forgone in choosing to take an alternative action.

replacement cost

The dollar amount required to replace an improvement at its current value.

yield

The interest earned by an investor on an investment (or by a bank on the money it has loaned). Also, called return.

fair market value

The price a reasonable, unpressured buyer would pay for property on the open market.